Seattle Bubble

An article in today’s Seattle Times goes nicely with Mr. Cohen’s article in the P-I a couple days ago.

More sellers are growing desperate as homebuying stalls locally

I especially like the first part of the subtitle text (emphasis mine):

The Puget Sound area housing market, supposedly immune to the forces pulling down others across the country, is seeing more inventory, fewer sales and falling prices, and that’s stressing out Seattle-area sellers — particularly those who need to sell quickly to avert foreclosure or move out of town. Instead of taking advantage, buyers are sitting on the sidelines.

Guess who didn’t write this article. If you guessed Elizabeth Rhodes, #1 Local Housing Cheerleader, you win. Anyway, here are some interesting excerpts:

The Seattle-area housing market, once touted as bulletproof against the forces that were pulling down other markets across the country, is now stressing out sellers, who are seeing inventories rise, sales fall and prices drop. Many are shellshocked — particularly those needing to move out of town or trying to forestall foreclosure.

I wonder why they would be “shellshocked.” Maybe because this very paper was loudly proclaiming Seattle’s immunity to the housing bust to anyone who would listen? Anybody remember this gem from a big front page story in the Times back in September 2006?

Princeton economist Paul Krugman, writing in The New York Times, said: “The long-feared housing bust has arrived.”

Nationally speaking, anyway.

If history is any indication, King County may escape it, according to a Seattle Times analysis of single-family-home prices. It shows that appreciation rates have risen and fallen, sometimes precipitously.

But not once since 1985 — through recession years, interest-rate spikes, wars and employment downturns — has the countywide median price of a single-family home fallen, although it’s come close.

Also note the subtitle on the graphic:

Prices are dropping in some cities around the country, but local economists don’t expect that to happen here.

Anyway, back to today’s article:

As recently as last year, buyers were paying above list price and sometimes even waiving home inspections to come out the winner in multiple-offer situations. Now they seem content to wait for … what exactly? Prices to drop even further? Superior mortgages? Clarification of the Wall Street crisis? The election?

Don’t you just love the condescending, almost mocking tone?

As the asking price on their Shorewood house keeps falling, the financial and emotional burdens keep mounting for Dave and Kim Mantel, who take ownership next month of a new house in Tucson, where they plan to retire.

“When we made our decision last December to go ahead and start the Tucson construction, we couldn’t have envisioned having this much trouble selling our house,” Dave Mantel said. “We knew the nationwide market was having trouble but Seattle seemed immune. We just couldn’t have picked much worse timing.”

The house in Shorewood, which is between West Seattle and Burien, has a panoramic view of Puget Sound and the Olympics. The Mantels put it on the market in April after a remodel. They’ve lowered the asking price four times — the last a $50,000 drop to $799,000 — but have yet to receive a firm offer.

On the one hand, I feel bad for people like this family that bought the line they were being fed by the likes of the Times and other rosy news outlets. On the other hand, when you’re spending close to a million dollars on something, you have at least a little responsibility to do some due diligence. Folks like this family and others that “need to sell” that bought into the hype are getting burned if they overpaid for their homes. I guess I’d have more sympathy if nobody saw the present situation coming, and today’s market came out of left field totally unexpected.

(Stuart Eskenazi, Seattle Times, 10.02.2008)

WaMu is still making headlines, and in this case I don’t think any press is good press…

New York Times: Washington Mutual Is Said to Consider Sale
Seattle Times: WaMu scrambles to stay alive; it may be trying to find buyer

From the Seattle Times article:

With the wreckage from the nation’s worst financial crisis piling up around it, Washington Mutual strove Wednesday to salvage itself, reportedly considering all options up to and including a sale of the entire company.

WaMu declined to comment on what it called “rumors and speculation.” But its largest shareholder granted it a key financial concession — clearing the way for anything from a big capital infusion to an outright sale — and both The New York Times and The Wall Street Journal reported investment bank Goldman Sachs has been shopping Seattle’s biggest financial institution to potential buyers.

Any purchase of WaMu likely would lead to the loss of thousands of jobs in Seattle, at a time when unemployment is rising and the local economy is generating few new jobs.

WaMu employs more than 3,500 people at its headquarters at Second Avenue and Union Street, along with 800 people elsewhere in Seattle and 1,500 people elsewhere in the state.

WaMu’s options seemed to be narrowing almost hourly. With other troubled financial firms seeking buyers to avoid bankruptcy or federal takeover, fewer and fewer companies have both the means and the potential desire to buy WaMu.

If my basic understanding of the process is accurate (big if), any potential buyer of WaMu would be forced to “mark to market” WaMu’s entire portfolio after a sale, which means immediately taking billions of dollars of losses.

I would think that if there were a bank out there that was capable and interested in buying WaMu, they would have come forward by now.

The local unemployment rate continues to rise sharply, according to the August data that was just released.

As economic thunderstorms lash Wall Street and soak most of the rest of the country, Seattle and Washington state have managed to stay fairly dry. But beware: The skies are darkening quickly.

Unemployment in Washington state took a big jump last month, more evidence that the local economy is sliding toward recession. And though inflation abated a bit, prices for food, fuel and shelter are still considerably higher than a year ago.

The statewide jobless rate hit 6 percent in August, after adjusting for seasonal variations, versus a revised 5.6 percent in July, the state Employment Security Department reported Tuesday. That was just below the national rate of 6.1 percent.

The last time the state jobless rate was this high was October 2004, when the state was coming out of its last economic downturn. Now, however, unemployment is rising rapidly: As recently as February, the jobless rate stood at just 4.5 percent.

Unemployment also rose sharply in the Seattle metro area, to 4.8 percent from 4.3 percent in July.

Here’s a long-term chart of Seattle-area (King/Sno) unemployment going back to 1990, to provide some context for the latest report:

Click to enlarge

Uunemployment is still relatively low, but the rate is definitely climbing quickly. From December 2000 to March 2002, local unemployment shot up 2.5 points. That’s an average rate of 0.17 points per month. This time around, the rate has gone up 1.4 points so far in the last four months, for an average increase of 0.35 points per month.

In other words, unemployment is rising at twice the rate it did leading into Seattle’s last recession. If this rate of increase keeps up, we’ll hit 7% local unemployment by March.

We’re only four months into the current spike, so I wouldn’t read too much into this data, but it’s certainly not very reassuring.

Source: Workforce Explorer

Oh man. They let Elizabeth Rhodes take just one day off, and look what happens:

Gahh! It’s right there in giant black print, above the fold on the front page! I can’t imagine the Seattle Times’ real estate advertisers feeling too great about this…

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The Washington Center for Real Estate Research posted their latest “Market Snapshot” data (pdf) this week.

Here’s an article on the data from the Times: Home sales still sliding in state, Puget Sound region

WCRER director Glenn Crellin continues to blame the media and buyer fear for the floundering market:

“Buyers see and hear stories about the collapse of the national housing market everywhere, and that makes them afraid to move forward with a purchase,” said Glenn Crellin, center director.

According to the WCRER, King County home prices rose from the first quarter to the second, but are still around 5% below their 3rd Quarter 2007 peak.

Click to enlarge

The WCRER’s affordability index dropped from 76.6 in Q1 to 74.3 in Q2. The low point for affordability was Q2 2007 at 66.1.

When they post the more detailed data from their Q2 report, it can be found here.

There isn’t really a lot to say about this data, since it’s nothing new to anyone who has been regularly following the monthly data from the NWMLS. Prices had a slight spring bounce, but not enough to put them in the positive YOY. Affordability is still in the gutter.

Even when we have direct access to the hard facts of the local real estate market, it’s still fun to see what kind of spin the local papers put into their report of the data. So, it is time yet again to continue our monthly tradition of rounding up all the local “mainstream” articles about last month’s housing data.

How many ways can you print “now is a great time to buy”? Read on to find out…

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